Securities Industry Commentator by Bill Singer Esq

Lawyer Says His Compulsive Hoarding Fostered Failure to Timely Pay Taxes

(BrokeAndBroker.com Blog)

Co-Founder Of Cryptocurrency Company Who Defrauded ICO Investors Sentenced To Prison (DOJ Release)

SEC Charges Third Promoter of Multi-Level Digital Asset Marketing Scheme (DOJ Release)

SEC Charges Tennessee Investment Adviser, Representatives for Failing to Disclose Conflicts

15 named in $26 million international trade fraud scheme (DOJ Release)

Former Amarillo Banker Pleads Guilty to Embezzlement (DOJ Release)

FINRA Fines and Suspends Rep for Exercising Discretion Without Written Authorization

In the Matter of Drew R. Mantel, Respondent (FINRA AWC)

In or about July 2017, FARKAS, along with co-defendants Sohrab Sharma and Raymond Trapani, founded a company called Centra Tech that claimed to offer cryptocurrency-related financial products, including a purported debit card, the "Centra Card," that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards.  From approximately July 30, 2017, through October 5, 2017, FARKAS and his co-defendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech ("Centra tokens" or "CTR tokens"), through a so-called "initial coin offering" or "ICO."  As part of this effort, FARKAS and his co-defendants represented, in oral and written offering materials that were disseminated via the internet: (a) that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named "Michael Edwards" with more than 20 years of banking industry experience and a master's degree in business administration from Harvard University; (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard; and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims.  Based in part on these claims, victims provided millions of dollars' worth of digital funds in investments for the purchase of Centra Tech tokens.  In or about October 2017, at the end of Centra Tech's ICO, those digital funds raised from victims were worth more than $25 million.  At certain times in 2018, as the defendants' fraud scheme was ongoing, those funds were worth more than $60 million.

The claims that FARKAS and his co-conspirators made to help secure these investments, however, were false.  In fact, the purported CEO "Michael Edwards" and another supposed member of Centra Tech's executive team were fictional people who were fabricated to dupe investors, Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard, and Centra Tech did not have such licenses in a number of those states.

In 2018, this Office and the Federal Bureau of Investigation ("FBI") seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions.  The United States Marshals Service sold the seized Ether units for approximately $33.4 million earlier this year.  Following entry of a final order of forfeiture, these funds and other forfeited fraud proceeds will be available for potential use in a remission program that the Department of Justice intends to create to compensate victims of the Centra Tech fraud.

[K]arina Chairez, [is] a high-level promoter of the AirBit Club investment scheme that targeted Latinx and Spanish-speaking communities, for acting as an unregistered broker. The SEC previously brought similar charges against two other high-level promoters of AirBit Club, which promised investors returns through a purported digital asset trading program and from the recruitment of others.

The SEC's complaint, filed today, alleges that Chairez solicited investors for AirBit Club, including through social media platforms and in-person meetings, without registering with the Commission. According to the complaint, Chairez raised large sums from investors, positioned herself at the top of an extensive pyramid of AirBit investors, and received substantial compensation from AirBit for the sale of the securities.

[F]rom at least June 2015 until June 2018, CapWealth, Pagliara and Murphy, failed to adequately disclose conflicts of interest arising from their selection of mutual fund share classes that charged 12b-1 fees, instead of lower-cost share classes of the same funds that were also available to clients. According to the complaint, those 12b-1 fees were paid to an affiliated broker-dealer under common ownership and control with CapWealth, which in turn paid some of the fees directly to Murphy as compensation, and indirectly to Pagliara, through his majority stake in CapWealth's holding company. In addition, the complaint alleges that CapWealth, Pagliara and Murphy breached their duty to seek best execution for their clients' mutual fund share class purchases by causing certain advisory clients to invest in fund share classes that charged 12b-1 fees when share classes of the same funds that presented a more favorable value for the clients were available.

According to the complaint, CapWealth also failed to adopt and implement written policies and procedures designed to prevent these violations. CapWealth was eligible to self-report to the SEC pursuant to the Division of Enforcement's Share Class Selection Disclosure Initiative, but did not do so.

[T]he defendants conspired to avoid anti-dumping duties associated with off-the-road (OTR) and light vehicle and truck (LVT) tires from China. Working through and with Winland, individuals allegedly imported OTR and LVT tires from companies that were subject to anti-dumping duties associated with Chinese tire manufacturers who had engaged in unfair trade practices in the United States. 

The complaint further alleges U.S.-based defendants conspired with defendants in China to obtain falsified invoices and entry records of Chinese tire companies that were subject to a lower duty rate than the actual manufacturers of these tires. Defendants submitted these falsified records to U.S. Customs officials when importing tires into the United States, so that Winland could avoid paying the higher duty rates, according to the allegations. The indictment and complaint also allege they used these falsified records to understate the value of these tires, further lowering the amount Winland owed in duties.

The value of these tires allegedly exceeded $20.9 million and resulted in the deprivation to the United States of more than $6.5 million in import duties.

[C]ooper began working at FirstCapital Bank of Texas in Amarillo in 2012 as a mortgage loan processor where she met with customers at loan closings and guided them through the mortgage and loan process.

From August 2017 to January 2020, Ms. Cooper admitted to making more than 19 fraudulent withdrawals from at least four bank customers accounts. On at least 18 separate occasions, Ms. Cooper signed a withdrawal slip from the bank customer's account, which she then used to purchase a cashier's check - each exceeding $1,000 in value. Additionally, Ms. Cooper admitted to making a cash withdrawal from a bank customer's account by forging the customer's signature on the withdrawal slip.

In plea papers, Ms. Cooper also admitted to using a credit card issued by FirstCapital Bank of Texas for personal expenses including payments to a cell phone company and various restaurants.

In total, Mrs. Cooper caused at least $32,171.00 of losses to the bank and its customers.  . . .

[I]n August 2003, Mantel registered with FINRA as a GSR through an association with Edward D. Jones & Co., L.P. On April 10, 2018, Edward Jones filed a Uniform Termination Notice for Securities Industry Registration (Form U5), disclosing that Mantel was under internal review for some of the conduct described below.

[O]n November 6, 2020, Ameriprise filed a Form U5 for Mantel, disclosing that the firm terminated him for some of the conduct described below. . . .

From June 2017 through January 2018, while at Edward Jones, Mantel exercised discretion when executing approximately 110 transactions involving seven customers, including four seniors. From June 2018 through September 2019, while at Ameriprise, Mantel exercised discretion when executing approximately 30 transactions in seven customers' accounts, including two seniors. Although the customers knowingly permitted Mantel to exercise discretion, he did not have their written authorization or his firms' approval, which in any event would not have been granted due to the firms' policies, which prohibited the exercise of discretion except in circumstances not present here. 

Mantel exercised discretion without written authorization despite receiving informal discipline from Edward Jones, in July 2014 and July 2015, and from Ameriprise, in July 2019, for the improper use of discretion. At both firms, the informal discipline consisted of written warnings in addition to oral discussions about the firms' policies regarding the use of discretion.

• Securities Industry Commentator
• Bill Singer